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In a significant boost to its foreign exchange reserves and economic stability, the State Bank of Pakistan (SBP) announced on Wednesday that it has received Special Drawing Rights (SDR) 760 million, equivalent to approximately $1.023 billion, from the International Monetary Fund (IMF) under the Extended Fund Facility (EFF) programme.
This funding marks the second tranche of support under the EFF, raising the total disbursement to $2.1 billion (SDR 1.52 billion) to date.
Amount to Reflect in FX Reserves by May 16
According to the SBP’s official statement, the newly received funds will be reflected in Pakistan’s foreign exchange reserves for the week ending May 16. The disbursement comes shortly after the IMF Executive Board’s approval on May 9, which not only cleared this tranche but also endorsed a new $1.4 billion arrangement under the Resilience and Sustainability Facility (RSF) to support Pakistan’s climate adaptation and sustainability efforts.
The SBP emphasized that the tranche would help bolster reserves and provide much-needed external financing support during a critical period of macroeconomic adjustment.
India’s Objections Rejected by IMF Board
This development comes against the backdrop of renewed geopolitical tensions between Pakistan and India, particularly following a deadly attack in Pahalgam, Indian Illegally Occupied Jammu and Kashmir (IIOJK), in which India lost 26 tourists and accused Pakistan of involvement—a charge Islamabad has denied.
India reportedly urged the IMF to reconsider the disbursement, but the Fund proceeded with the approval. Responding to the controversy, Prime Minister Shehbaz Sharif hailed the IMF’s decision as a rejection of “false propaganda” and a validation of Pakistan’s commitment to reform.
“This is a victory for Pakistan’s economic credibility and a rebuke to those using underhanded tactics to derail our progress,” the Prime Minister’s Office (PMO) said in a statement.
Experts: IMF Tranche Critical for Stability and Reform
Speaking to Geo.tv, Dr. Khaqan Hassan Najeeb, a former advisor at the Ministry of Finance, stressed the importance of continued IMF engagement. “Securing the first review of the EFF was crucial for Pakistan,” he said. “It not only ensures ongoing macroeconomic stability but also facilitates the rollover of external debt and fulfills new financial commitments.”
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Dr. Najeeb highlighted that inflation control, improvements in the current account, and the reduction in the policy rate were key macroeconomic outcomes underpinning this positive development.
“More importantly,” he added, “this IMF support provides breathing space for long-overdue structural reforms. The upcoming Budget FY26 is a pivotal moment to undertake serious transformation—particularly in government expenditure and equitable taxation.”
He concluded with a broader vision: “Reorienting the economy toward sustainable productivity requires long-term vision, beyond what any three-year EFF programme alone can provide.”
Finance Minister Seeks Expansion of China Currency Swap Line
On the sidelines of the IMF-World Bank Spring Meetings 2025 in Washington, Finance Minister Muhammad Aurangzeb met IMF Managing Director Kristalina Georgieva. During the discussions, he reaffirmed Pakistan’s reform agenda and also requested an expansion of Pakistan’s currency swap line with China from 30 billion to 40 billion yuan (around $1.4 billion).
This expansion is seen as crucial to diversifying Pakistan’s external financing sources, especially as the country attempts to reduce its dependence on short-term loans and focus on strategic partnerships.
IMF, Pakistan and the Path Forward
The IMF’s latest disbursement under the $7 billion EFF programme, agreed upon at the staff level in March 2025, is aimed at strengthening Pakistan’s economy through stabilization and structural transformation.
The Fund’s endorsement also included recognition of Pakistan’s efforts in climate resilience, under the newly approved Resilience and Sustainability Facility, which seeks to support countries vulnerable to climate shocks by enabling sustainable, long-term reforms.
For Pakistan, this comes at a critical juncture, as it navigates economic pressures, regional instability, and a pressing need for fiscal consolidation.
